Fed Wor­ried about $2Tril­lion Loans in Real Es­tate Mar­ket

The Economic Times - - Finance & Commodities -

New York: For­get won­der­ing when US in­fla­tion will reach the Fed’s goal. It may be there al­ready. The big­gest monthly jump in al­most four years in the La­bor Depart­ment’s con­sumer-price in­dex led some an­a­lysts to raise theires­ti­matesonWed­nes­day­for the Fed’s pre­ferred in­fla­tion gauge, the Com­merce Depart­ment’s per­sonal con­sump­tion ex­pen­di­tures price in­dex. Mor­gan Stanley’s Ted Wiese­man and Michelle Gi­rard of NatWestMar­kets­saidthePCE mea­sure prob­a­bly rose 2% in Jan­uary from a year ear­lier, up from pre­vi­ous pro­jec­tions of 1.8%. Econ­o­mists at Gold­man Sachs gave an es­ti­mate of 1.98%. If con­firmedin­datadueMarch1, it would mark the first time since April 2012 that the in­dex has hit the cen­tral bank’s 2% goal. —Bloomberg The fear of what Fed Chair Janet Ye l l e n on Tues­day called “wait­ing too long” be­fore rais­ing in­ter­est rates is in­creas­ingly in­sert­ing it­self into Fed pro­nounce­ments.Oneof th­ea­spects – and this is get­ting ar­tic­u­lated with in­creas­ing in­ten­sity – is com­mer­cial real es­tate (CRE) and its im­pact on banks whose nearly $2 tril­lion in CRE loans are backed by col­lat­eral whose boom-prices are known to crash pe­ri­od­i­cally in phe­nom­e­nal busts. Or is it the fear of “hav­ing al­ready waited too long?”

Boom and bust: that’s the ma­te­rial CRE is made of. We had seven years of boom, and now the Fed is wor­ried about the bust. Yel­len­didn’tmen­tionCREin­her pre­pared tes­ti­mony on Tues­day be­fore the Se­nate Com­mit­tee on Bank­ing, Hous­ing, and Ur­ban Af­fairs. — Busi­ness In­sider

His name was among the few men­tioned as the prob­a­ble min­is­ter who could His name was among the few men­tioned as the prob­a­ble min­is­ter who could take over

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